The oldest money exchange house in the UAE is tapping the US start up, Ripple, in order to make instant and low cost remittances. This is in order for the operator to use the power of blockchain technology to facilitate the real time cross border payments.
This was first reported by Arabian Business, where the CEO of UAE Exchange gave an interview on the announcement. He was quoted as saying
We are in the process of tying up a deal with distributed ledger start-up, Ripple, for real-time cross border payments.
He also claimed that the UAE exchange has been investing significant amounts into blockchain technology including investments in a blockchain innovator called Loyyal which aims to build a global loyalty network.
This appears to also be also part of a general wave of adoption by other financial institutions in the Gulf region. We also saw in February that the National Bank of Abu Dhabi also formed a partnership with Ripple to speed up intraday and cross border payments.
Similarly, last October the largest commercial lender in the UAE, Emirates NDB announced that it was using an partnering with an Indian bank, ICICI, in a pilot project to use block chain technology for their remittance and trade finance solutions.
Blockchain to Replace Industry Giants?
In further evidence that the remittance industry is poised for a takeover, the vice president of FXTM explained to the Arabian business reporter that adopting Bitcoin for remittance and forex business is where the industry is indeed headed.
Currently remittances are either done by the banks themselves or through one of the large remittance operators. When done through a bank, remittance fees usually cost about 6% and take about 3-4 days to effectively settle.
If someone was to use one of the remittance operators such as Money Gram or PayPal, transfers can be done quicker but usually command fees of about 4%. If they were to use a Bitcoin based remittance operator the fees would be in the region of approximately 1% and it would take a day.
The executive went on to explain how large the market was with around 230 million people sending about $500 billion abroad every year. Traditionally, firms such as Western Union, MoneyGram and other remittance operators control about 25% of the market. Even though these methods of payment are popular, there is no doubt that a Bitcoin based solution has significant scope to disrupt this market share.